Broadcom 2nd-Quarter Net Down 8.6% on Expenses; Revenue Jumps
07/24/2012| 05:24pm US/Eastern
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--Broadcom posts record 2Q rev on sales growth across all business units
--3Q guidance is better than feared, despite midpoint falling below Street estimates
(Updates throughout with additional details and analyst comments.)
By Shara Tibken
Broadcom Corp.'s (>> Broadcom Corporation) second-quarter earnings fell 8.6% but the maker of smartphones and networking chips posted record revenue as it benefited from strong sales across its various business units.
Earnings topped analysts' expectations, and revenue was at the high end of the company's guidance. In particular, Broadcom's mobile and wireless business was stronger than it had expected, with smartphone customers buying more 3G chips from the company.
Chief Executive Scott McGregor noted Broadcom's efforts to integrate many functions on the same chip is driving market share gains and increasing the amount of chip content the company has in each customers' device. He added that Broadcom is well positioned to deliver above-market growth over the long term.
For the current period, Broadcom projected revenue of $2 billion to $2.15 billion, bracketing analysts' estimate for $2.11 billion, according to Thomson Reuters. The company also said adjusted product gross margin should be roughly flat from the second quarter.
Shares, down 11% over the past three months through Tuesday's close, grew 3.7% to $31.90 in after-hours trading.
Wedbush analyst Betsy Van Hees said the midpoint of Broadcom's third-quarter revenue guidance was slightly below analysts' estimates, but investors were expecting even softer results due to the tough environment
"In today's really tough environment, a modest miss is in the win category," she said.
The Irvine, Calif., company has benefited from its exposure to iPhone maker Apple Inc. (>> Apple Inc.) and competing smartphone maker Samsung Electronics Co. (005930.SE, SSNHY). Its overall results have been hurt in recent periods by weakness at Nokia Corp. (>> Nokia Oyj) and other major handset customers, but it has likely been getting a boost of late from woes at wireless chip rival Qualcomm Inc. (>> QUALCOMM, Inc.), analysts have said. Chip shortages at Qualcomm are likely causing some customers to turn to Broadcom for 3G processors.
Broadcom in May said 3G chip sales surpassed 2G sales for the first time in the first quarter. At that time, the company said revenue from 2G should continue to decline through the year. Samsung is Broadcom's bigest customer for 3G, while Nokia, which is struggling, is the main 2G customer.
The company on Tuesday reported its mobile and wireless revenue totaled $900 million in the quarter, up from $875 million in the first quarter. It had expected sales to be flat sequentially but said it got a boost from its wireless connectivity chips.
Also helping results is Broadcom's recent $3.7 billion purchase of NetLogic, which makes network-focused processors. Broadcom has been targeting the networking market as a big growth area, and it has made other recent acquisitions in the area.
In the second quarter, infrastructure and networking sales increased 18% sequentially to $480 million. Excluding NetLogic, the segment's revenue rose about 6%, Chief Financial Officer Eric Brandt said during a conference call.
Broadband communications segment revenue, which includes chips for set-top boxes, rose 9.9% sequentially to $543 million.
Overall, Broadcom reported a second-quarter profit of $160 million, or 28 cents a share, down from $175 million, or 31 cents a share, a year earlier. Excluding stock-based compensation, amortization and other impacts, earnings were flat at 72 cents a share. Analysts were expecting per-share earnings of 67 cents.
Total revenue grew 9.7% to $1.97 billion, in line with Broadcom's May view of $1.9 billion to $2 billion.
Gross product margin narrowed to 46.7% from 49.6%. Total operating costs and expenses rose 12%.
--Kristin Jones contributed to this report.
-Write to Shara Tibken at shara.tibken@dowjones.com
Corrections & Amplifications
This article was corrected at 5:36 p.m. EDT to correct the quarter referenced in the fourteenth paragraph. The results were for the second quarter, not the first quarter.
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